shop owners, how much is too much and when do you throw in the towel?

disclaimer: not trying to have a pitty party, just looking for some sage advice from people i know have been here before.

i am a hard working, motivated young guy with good health, good help, half a brain and a reasonably well tooled up shop. We think outside the box in our approach to work and take on jobs that many other shops in town say "cant be done". We go above and beyond and put in weeks and weeks of 16 hour days in a row when we need to.
we do it affordably, usually with a smile and always with pride.
i work pretty cheap and aside from a pair of red wings and a cheap dinner out with my woman once every few weeks i live even cheaper.

ive been working hard at this shop thing for the better part of ten years now, going on 3 years in the new space, and success seems fleeting at best.
the ups are very few and far between and more often than not peter is being robbed to pay paul, my health is suffering and i see my family for an hour or two every few days if im lucky because im locked in the shop 7 days a week, 16 hours a day.
and forget about friends, i haven't seen one of those in months.

so as i sit here this week (healing from a broken rib which ironically happened remodeling the shop last week), contemplating the idea of closing the doors of the shop for good i figure some advice from other shop owners would give me some real world perspective.
our last year has been mostly 'request for quote' type work and my labor and operating costs have driven me almost completely into the red.
90% of the customers i have been working for have proven time and time again that they have no allegiances and will always seek a cheaper shop. I have learned that this is not worth fighting for as no matter how much you give it away there will always be someone hungrier out there to undercut you.
it seems some months that if i keep going past a certain point catastrophic failure is inevitable and so moving on while i still have options on the table seems like the logical choice sometimes.
how many of you have been in this predicament and stayed at it to find your success, and how many of you took a hard look at your situation and decided to try something else out..maybe a change of direction in what you specialize in? maybe a few days off to clear your mind?
or maybe just shut it down and buy that hot dog cart...
just looking for some real world advice from people who have been here before and what the other side of this looks like to most.

thanks in advance for humoring me

I look at my next door neighbor (he does job shop work, but has build up some repeat customers) and I marvel at the courage that it takes to function in this economy with that business model.
I chose a different approach. I too, think outside the box and decided the following:
Market across the country, not the local economy.
Design and build my own product.
Make the internet your main advertiser: Knew Concepts - Fine Metalsmithing Equipment Designed for Artisans - The Red Saw - Santa Cruz, CA
Don't get involved in credit card transactions. Use Paypal to handle that stuff.

Over the years, you have undoubtedly come up with an idea for a product. Luckily, I chose to work in an area where the customer base don't have the machinery to compete.

Never retreat, just advance in a different direction.

Lee (the saw guy)

Well, if you're taking money from somewhere else to keep the doors open, then what would be the point of being open, if there is no anticipation of the required cash flow appearing?

The other thing, you've not revealed what it is you do, and whether you are doing it in the most productive manner. That doesn't mean go buy all new cnc shit, it depends what you are doing.

I really do not have the experience to preach good advice to someone in your situation. But, I do wholeheartedly agree 120% with everything Lee just said!
The only advice I will add is a time proven saying: "keep doing the same thing, and you will keep getting the same results".
That phrase is the fuel for the recent opening of my own shop.

Vanguard,
First of all, if you don't have much work, why are you sequestered at the shop so much? Are you a 1-man shop or do you have employees? You might want to have a good, hard look at your books and figger out where your operating expenses are going. If you have the work, hire an employee or 2 so you are not married to the shop. do you do production work or repair work? If you do production work, seek out some repair work to fill in the gaps if needed. ("advance in another direction") Do whatever is necessary to lower your operating costs without compromising the quality of your output. ( IE: use cheap TP and lightbulbs) Don't be high strung about the type of work you take if the cash flow is on the weak side. Go out and shake some hands and hand out some cards to pick up some new customers. If your customers show no loyalty at all, take a serious look to see why. Bid work absolutely sucks, but it is a way of life in just about all fields. Sometimes you gotta bite the bullet and lower your price to get the work, it's just a way of life.

You also have to make time for a little R&R. If you put your whole life on hold to pursue a career (like I did) you will find that your whole life has slipped by you and you can no longer do the things you once did for fun, and many of your friends that you cherish are no longer around to do it with. Life will pass you by like a top fuel dragster if you let it. Also, it keeps going faster as time advances on! ! ! ! ! !

Not knowing your shop or personal situation, that's about all of the advice I can offer. But it sure sounds like a little "soul searching" is in order for you. You are at the crossroads facing some very tough decisions. Make them wisely.

Frank

Things that I learned when my first company was spiralling the drain, then closed and since:

Things were going badly. I was working like an idiot, both in hours and in practice. I was thinking about the same things as you. If you work too much for too long you will not be productive.

Before I closed, I had the thought that I was not closing up because I was too cheap. Every RFQ, I went higher than I would have ever went before. I figured I was busy with cheap work, if people but on the higher price I could be busy with that instead. I was shocked to get a higher percentage of work than before with my new pricing scheme. Perceived value? I don't know.

Look at the jobs you are running. Working 80+ hours a week should make you wealthy. Get rid of the ones that you are not making money on. Telling a customer no is not a bad thing. I would rather take a nap in the afternoon than pay my customer to work for them.

I worked myself into a big hole, robbing Peter and all. That was my eventual downfall. Get yourself on firm financial footing. I don't know how yo tell you to do this. Beans and rice. Cheap toilet paper. No one needs cable tv or bottled water. Get rid of your wants until things are in the black. It sucks, but when you are not worried about how to make bills and payroll, it is really worth it.


You CAN make it. Sure as hell is not going to be easy. Will require a lot of work and thinking about each part that you should and should not make. I would think everyone here will be cheering for you.

good suggestions guys, thank you.
as for what i do here it is all over the place from motorcycle parts to handrail fabrications to weld repairs. i guess we are somewhere between machine shop, wed shop and job shop.
i do have one full timer and a few part time guys that help when i am in the weeds.
we have had a tremendous amount of work lately but after the bills and taxes are paid i wind up being able to put nothing away for 'next month' so if there is a down week we are screwed again for the month.
my few main customers have been falling off as i have been trying to get my prices on a realistic level and they just find the next cheap shop to work with instead.
im thinking that it's high time i look into making a product line up and have some good ideas as i come from a interior woodworking, stairs, casework background and have a good idea of what specialty tools are missing from that field.
i guess im not looking for that simple one sentence answer as much as a collection of thoughts on how to stay in my shop, where im happiest, and yet be able to afford to go to the dentist when i need to.

+1 for your own products.

I certainly don't want to sound like a seasoned pro at this stuff. I've been making parts with my own machines for a short 3 years now. I only bought what I needed to make my own products. I will do whatever outside work that fits my abilities that comes through the door through word of mouth, but I do not do anything RFQ nor would I ever want to compete with other real job shops.

The reality that I see is that I'm able to make a fair income from the parts I make and sell. None of the stuff I make is especially difficult, all of it is "outside the box" for sure and I'm positive that nobody who inspects the parts would ever imagine they are made in a pole barn in the woods with 30+ year old CNC equipment, War manual machines, craigslist tooling scores and some forming equipment built from shit from the scrap dumpster and an old mechanical house jack. The parts are sold online and through a couple distributors. I had a habit of pricing my stuff too cheap not being well equipped at the business side of things. One of my distributors actually told me to raise my prices so I could be sure to make enough to be around for a long time so now I come up with whatever price I think a product should sell for and add 40%. This seems to work much better and the parts sell just the same, possibly better. The cheapest thing I sell is $650 and runs about $90 to make. The most expensive is over $2000 and costs about $400 to make. I can sell a couple of the cheapest parts I make in a month and pay for all my business and family expenses for the month. If I sell more than 5 it's a great month.

I've had a couple employees. I wasn't making anything by having the added expense and really feel I learned that I'm not cut out to manage other people nor am I good at finding good workers.

My business model is simple, be only as big as I can personally handle, make decisions with the goal of making money and building the business into a successful entity/brand separate from myself that I can offload someday for more than the equipment would bring at auction.

I never want to be "stuck" as a no-profit shop owner with employees and family members relying on me to hold it all together.

That's a tough spot. I remember looking a few years ago at what it would take to go from 1 man shop at home, to renting a spot in the park, adding a few more machines, meeting the extra regulations and added costs, figured it would take at least 5 guys kept busy full time to just break even if all went ok, but there's always screws up, and it left barely enough to draw a little salary. I wouldn't be able to make parts cause then its a full time job just trying to get work and run the show(and I ain't really the best guy at that...). The only couple places I know that do well with only 1-3 employees have their shop on their property, paid for. There might be a few that manage it if they're in some special high $$ work, or somehow have low overhead, but I don't think there's too many in that bracket.

As to having your own products, been trying to do that here for a few years. Never have enough time to finish any project, got a few proto, I'm trying hard to take 1-2hrs every few nights to pick at one thing now to get it done. Takes time, I ain't putting any eggs in that basket when there's other sure $ coming in. It's also hard to want to spend more time in there after a full day making parts for others, brain ain't always into it. Thought I'd manage to do this product development stuff on weekends, but weekends are still when I get most of the rush work done.

Good luck figuring it out.

Worth saying you'd find few companies today of any size that can lose even 10% of their employees if work slows down, and still be able to cover all the costs.

Sounds like you making it cheap is costing you. Price what it costs to you and add a bit more. Look at what you make money at and work from there. Putting in stupid hours just to get by is insane. You don't need to pick up job that you RFQ'd. Or explain why you asked for more. Often they will go for it as long as you explain it to them. Always give good work and don't insult their intelligence. Finding out what makes you the money is very very important. I often look at a part to think of what I think they would value it at, and determine from there if it is worth quoting on. Someone asked me how much it costs to bring over 2-3 pcs of bodies and machine out the thread, I told him $20 each. He seemed affronted by this, like it should take only a few minutes, but it doesn't make money doing it for $5 each and getting them done in a half hour and then delivering them, doing paperwork and BS. The setup takes 15 minutes, the piece runs about 5 minutes each, but then there is delivery and the paperwork. Doing for less than $60 will put you out of business. Sometimes people will ask you to make something that is like what someone else does, this is where money can be made. They look at it as new price, they buy something for $170 for the item...charging them $130 will make their day even though it only costs 20 minutes machine time to make, and they get it next day instead of a week and a half from Europe. Know what makes you money and go after that and be realistic and honest. Honest to yourself.

You never said what kind of work you do. For a manual shop. Find a local producer like a chicken kill plant, they always need extra parts for this or that - that they need right away and don't care on price - high reasonable will tickle them pink. Find the maintenance purchaser and see what kind of problems he is having. Stuff like this will get you good work.

Manufacturing today has to be one of the most expensive trades to be in. Being stuck in the Job-shop game is not a fun place to be but is essential to stay alive. I absolutely can not stand to compete in the cut throat game of job shopping. I am totally for job shopping for new customers but I simply don't have time to be someones quoting house. Few things suck worse than doing work for companies that have no allegiance to you. Its always interesting when I find out they start shopping around to save a nickle. 9 times out of ten those same customers come back when their parts come back looking like hammered hell from the "new" supplier. They gladly pay our higher prices to get quality parts the first time, every time.
Remember, you can not stay in business being the cheapest shop on the block all the time. Like many said before, diversify your workload, That way when one sector gets slow, another will carry you.
You have to be an adrenalinene junky to be in this game, get your fix when times are good but leave some money in the bank for those slow times. They will come and they are dreadfulll! Hang in there if you have the stomach to otherwise sell everything, get a job and be content with the things you have, not what you don't have.

you guys are giving me a little more hope with every single one of these responses .
i have a few ideas that im gonna try, fingers crossed.

Don't sell yourself too cheap. I try to avoid the lowest bidder when I look at quotes - instead, I look at the rest, and I can pick out the guy who doesn't want the work (bids too high), then I look at the rest. If the price is too cheap, I figure that the bidder might not understand just what we need, or he's playing games with add-ons or substandard material. If everyone else is bidding about $ 10 per widget, and someone comes in at $ 5, I don't dare take a chance on an entire order being scrapped at receiving inspection.

well that's the shitty part of working with contractors and home builders..these guys have zero allegiances and seem to simply look for the cheapest quote.
they don't care where the material comes from, what processes you use or if it will look good in a few years.
using 304 outside, powder coating with no primer for outside aluminum jobs, booger snot welds, slag everywhere, 'evenly' spaced holes for cable rail that are literally .25" different from hole to hole, etc, etc.
they have no moral dilemma with passing a garbage product on to a customer as long as they make record profits. sounds like a lot of other American industries come to think of it.
the biggest motivating factor for this group is up selling bids and making money on subs.
and as they always say to me when i try to justify the extra cost for better work, "well, no one has ever complained before"
and i'm talking about award winning builders on Kiawah island building 1-5 million dollar houses for some of the richest people in the world. its absolutely mind blowing how cheap and underhanded these guys can be.

one of my biggest customers is apparently driving 5 hours each way into NC every week to pick up parts from a shop there that will do stuff for 20% or so less than me. that's 10 hours a week on the road plus lost time and gas money to save a few hundred bucks..if that tells you anything about the priorities of these guys.

I may not have much to offer, I'm on the other side of things, just starting out. I've had a freelance business in another field and I learned that as I raised my prices, I got more work. Too cheap and they expect cheap, so there's your 'perceived value' much like the story of the fridge on the curb. Put a fridge on the curb with a sign that said "works perfect, free for removal" and it sits for weeks, change the sign to say $50 and it's stolen the next morning.

I've been doing repairs and fixes for a while and I'm tooling up to set up a part time job shop after I move next year. I say part time, as it will be nights and weekends for a while, I'm scared to give up my 9-5 with a decade behind me already. I've started shifting my thoughts and ways I handle things now though. I just took a look at a job, probably would have jumped all over it for the money they were talking, about a year ago, instead I told them it wasn't worth doing it that way, come to me with the right parts and I'll do it up for a reasonable fee. Well, that's what they're going to do. Moral there, don't sell yourself short.

Another thing is the outgoing cost. I have a job coming in about a week from now. I could pick up the raw materials locally (quick hop) for $X. I checked around and found that if I go a half hour further out, I can spend $2X yet have 6 times the material for that cost.

Now, rather than having a job shop and adding in product to expand or make ends meet, I'm actually setting up right now to produce three products (within the next couple months) to fund the rest of the shop setup. I have a few more on the horizon, which will add in ultimately, but my plan is to use the products to build and support the shop, the other work to add revenue and expand the business. With income from two directions (repair/small run AND production) if one side takes a dip, the other is there to support. I've applied this to my current second occupation, not putting all my eggs in one basket and it's carried me through the last 5 years when I've seen colleagues losing cars and houses because they remained committed to a single path.

What about relocation? If I'm reading your location correct as NYC, what about a bit of a commute, possible to go a half hour away and have half the overhead? I worked for a custom auto shop in TX that did that, moved a bit further away from Dallas, cut his costs in half and was able to keep moving forward. Recently a friend's shop here went from two units to one unit, consolidated and rearranged, so instead of closing because they were too tight to reliably hit rent, they're now able to put a bit back each month.

Last sentence of your last post... tells me about those guys plenty, tells me I wouldn't bother with them anymore, they have no common sense unless 1 hours a week on the road plus gas is costing them significantly less than that 20% (you didn't say if it was 20% of $1000 or $100000)

vanguard cycle said:

ive been working hard at this shop thing for the better part of ten years now, going on 3 years in the new space, and success seems fleeting at best.
the ups are very few and far between and more often than not peter is being robbed to pay paul, my health is suffering and i see my family for an hour or two every few days if im lucky because im locked in the shop 7 days a week, 16 hours a day.
and forget about friends, i haven't seen one of those in months.


or maybe just shut it down and buy that hot dog cart...
just looking for some real world advice from people who have been here before and what the other side of this looks like to most.

thanks in advance for humoring me

Click to expand...

So it's 13 yrs of IT SUCKS ????????????

Get a job... you'l get paid
git the hot dog cart....... you'l get paid

did i say anywhere that it sucked??
you must have skipped the part where i said the only place i am truly happy is in my shop

vanguard cycle said:

did i say anywhere that it sucked??
you must have skipped the part where i said the only place i am truly happy is in my shop

Click to expand...

Then why did you write this post?... Be Happy, Dont WORRY.... it's a old song for pretenders... for wanabeees.... hope you can afford the pain... and what will you do when the landlord kicks you out? THEN WHAT??

I guess I am a bit cornfused as to how you are "so busy" and still not going in the right direction?

Trust me - I have done those hours for decades. I know the drill.
But (short of a major manufacturing move to China in '01 and a Great Recession in '09/10) we were at least continually adding machines and capacity for a better tomorrow.

If you are busy and not have sometihng to show for the difference, then I guess it seems like you have a black hole in the shop somewhere. As much as I hate to ditch customers and people, you must not be making $ somewhere. You may need to figger out what part of your eqazsion is bogus, and edit it.

Edit = get rid of it, or bid higher on that work. If you lose it - you didn't "lose" anything.


-------------

Think Snow Eh!
Ox

vanguard cycle said:

our last year has been mostly 'request for quote' type work and my labor and operating costs have driven me almost completely into the red.
90% of the customers i have been working for have proven time and time again that they have no allegiances and will always seek a cheaper shop. I have learned that this is not worth fighting for as no matter how much you give it away there will always be someone hungrier out there to undercut you.
it seems some months that if i keep going past a certain point catastrophic failure is inevitable and so moving on while i still have options on the table seems like the logical choice sometimes.
how many of you have been in this predicament and stayed at it to find your success, and how many of you took a hard look at your situation and decided to try something else out..maybe a change of direction in what you specialize in?

Click to expand...

Your post certainly hits close to home for me...

I agree with previous posters that an RFQ-type business / being a 'job shop' is a tough gig. We are also a struggling job shop / "contract manufacturer" though not in the machining business. Others have pointed out that you can't just work insane hours and sell at rock-bottom prices -- on the other hand, if you're priced too high, you won't get the order either. IMO you should try to be in the middle of the pack, when you quote. Then highlight your capabilities/advantages, so that you position yourself as the best of the contenders. Not easy playing these guessing games. Try to talk to the customer before, during, and after the bidding process. This might minimize your guesswork and keeps your name on their minds.

vanguard cycle said:

we have had a tremendous amount of work lately but after the bills and taxes are paid i wind up being able to put nothing away for 'next month' so if there is a down week we are screwed again for the month.

Click to expand...

Been there too, as in you think you're doing well by being busy but there's nothing to show for it at the end of the month. You're running into the dreaded "breakeven point" -- not enough profit in the volume (shipments, sales revenue) that you do during the month, to pay for the fixed expenses/overhead for that month (rent, insurance, taxes, office salaries). You need to get the work out (as much as possible) each and every month, even if you have to hire temps or use overtime. It's just a numbers game -- either increase your volume, increase your profit margin, or both.

Trip59 said:

What about relocation? If I'm reading your location correct as NYC, what about a bit of a commute, possible to go a half hour away and have half the overhead?

Click to expand...

I like this idea. Try any means to reduce your overhead to minimize your breakeven point. Once you know you've paid your fixed expenses for the month, any additional business that comes in, as long as it's priced above your cost, is gravy.

oldster said:

I look at my next door neighbor (he does job shop work, but has build up some repeat customers) and I marvel at the courage that it takes to function in this economy with that business model.
I chose a different approach. I too, think outside the box and decided the following:
Market across the country, not the local economy.
Design and build my own product.
Make the internet your main advertiser: Knew Concepts - Fine Metalsmithing Equipment Designed for Artisans - The Red Saw - Santa Cruz, CA
Don't get involved in credit card transactions. Use Paypal to handle that stuff.

Over the years, you have undoubtedly come up with an idea for a product. Luckily, I chose to work in an area where the customer base don't have the machinery to compete.

Never retreat, just advance in a different direction.

Lee (the saw guy)

Click to expand...

A lot of good ideas here. IMO specializing in a niche (or niche product) is an underrated strategy. I can't guarantee it will work; we want to try it ourselves, and I have seen our competitors do it with success. Just imagine the irony of winning more business by limiting what you offer... who would've thought?

OT - nice to find Lee on this forum (I had wondered what happened to him or Bonnie Doon after it was sold.)

David